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Baystate Health, Inc. Attachments BAYSTATE HEALTH, INC. AMENDMENT TO DoN PROJECT #1-3B36 TABLE OF EXHIBITS JULY 31, 2018 Attachment 10.5.a Describe the Proposed Change Attachment 10.5.b Describe the Associated Cost Implications to the Holder Attachment 10.5.d Provide a Detailed Narrative, Comparing the Approved Project to the Proposed Significant Change, and the Rationale for Such Change A. Staff Summary for Approved DoN Original Decision Letter Amendments to Approved DoN 1. Staff Summary 2. Original DoN Approval Letter 3. Amendment Approval Letters (6) B. Project GSF C. Plans D. Historic Volume and Projections E. Articles of Organization and Amendments F. Notice ofintent G. Affidavit of Truthfulness and Compliance 578496.1 Baystate Medical Center Amendment to DoN Project #1-3B36 Attachment 10.5.a Describe the Proposed Change 1 Baystate Medical Center Amendment to DoN Project #1-3B36 10.5.a Describe the proposed change. Background Baystate Medical Center, Inc. (“Holder” or “Hospital”) received approval from the Department of Public Health on November 14, 2007 for new construction of a seven (7)-story addition for the replacement of medical/surgical beds, the addition of eighteen (18) medical/surgical beds and thirty (30) critical care beds, and other ancillary and support service replacements, improvements, and additions. In addition, the original DoN approval authorized the construction of a new building known as the "Hospital of the Future" ("HOF"). As part of a long-term strategic plan, the HOF was designed to include shell space that could be built out as required to meet the Hospital's service needs. The inclusion of shell space was intended to provide design flexibility that met identified future service and patient needs. The availability of shell space assures the continued modernization of the physical plant and compliance with current construction standards while meeting the Hospital's changing needs. At the time the original DoN was filed, it was contemplated that all shell space would be built out over a 15- to 20-year period as service needs are identified. Consistent with the original strategic plan for the HOF, the original DoN has been amended six (6) times to date as shell space is built out. Each amendment has allowed the Hospital to meet a distinct, identified service need. These separate build-outs achieve the goals of the flexible design for the shell space and allow the Hospital to continue to provide high quality health care. The chart below details each amendment to the Project in addition to the associated changes in the approved gross square feet ("GSF"). Filing Type Approval Approved Gross Square Footage (“GSF”) Date Total New Const GSF Renovation Shell Space New Const GSF GSF (without shell) GSF GSF (with shell) DoN #1-3B36 11/27/2007 641,250 303,300 42,150 295,800 599,100 Amendment 08/11/2009 630,504 303,300 44,900 282,304 585,604 Amendment 11/18/2009 686,086 303,300 44,900 337,886 641,186 Amendment 02/28/2011 692,276 381,857 48,974 261,445 643,302 Amendment 09/19/2012 692,276 461,973 48,974 181,329 643,302 Amendment 08/14/2014 692,276 475,616 48,974 167,686 643,302 Amendment 01/26/2017 698,634 486,749 55,332 156,553 643,302 With each amendment to the original DoN approval, the total maximum capital expenditure ("MCE") for the Project changes. These changes were contemplated at the time of the original DoN as it was determined that the Hospital would pursue amendments to build out the approved shell space as separate, identifiable projects as the need arose. The chart below sets forth the changes in the approved MCE associated with each amendment to the Project. Filing Type Approval Date Approved MCE Approved Year $ DoN #1-3B36 11/27/2007 $239,318,527 March 2007 Amendment 08/11/2009 $239,318,527 March 2007 Amendment 11/18/2009 $239,318,527 March 2007 Amendment 02/28/2011 $314,083,474 November 2010 Amendment 09/19/2012 $359,423,474 June 2012 2 Baystate Medical Center Amendment to DoN Project #1-3B36 Filing Type Approval Date Approved MCE Approved Year $ Amendment 08/14/2014 $366,266,390 April 2014 Amendment 01/26/2017 $373,520,390 October 2016 Please note that the amendments that do not have a corresponding change in the MCE were technical filings to reconcile the DoN with final architectural plans. The related DoN approvals for all the filings listed above are attached as Exhibit A. Consistent with the intent of the original DoN approval, the Holder is now seeking another significant amendment to build out additional space in its HOF building. Proposed Project At this time the Holder proposes building out 22,640 additional GSF in the HOF building to replace its existing 3,484 GSF electrophysiology lab on Daly 5, the 7,871 GSF cardiac catheterization procedure rooms located on Daly 3, and one 316 GSF operating room currently located on the Daly 1st floor. This amendment will result in a one-for-one replacement of these functional areas without any increase in the number of procedure or operating rooms; however, as such spaces will be consistent with current hospital construction standards, the replacement areas will involve more GSF than currently dedicated to these services. In addition to procedure or operating rooms, shell space will be built out to accommodate necessary and related support functions, including pre- and post-op care bays, staff support space, waiting room, and elevator and switchgear installation. Collectively, these activities are the “Project.” This amendment will increase the total Project GSF to 703,560 GSF. This is the result from the build-out of an additional 22,630 GSF of shell space and an additional 4,926 GSF of renovation. The total incremental MCE is projected as $56,032,439 (July 2018 dollars). This brings the total MCE for the DoN to $429,552,829. The proposed build-out of space to accommodate the electrophysiology and cardiac catheterization procedure rooms, along with the relocation of one operating room into one general area where the heart and vascular operating rooms and related critical care beds are located, has been a key component of the Hospital's long-term Heart and Vascular Services Master Plan. By locating all of these related functions in the same area, an interdisciplinary approach to care is facilitated and certain service efficiencies can be obtained. Approval of this significant amendment to the Project will allow the Hospital to continue to achieve high quality of care in the delivery of its heart and vascular services in clinically integrated and state-of-the- art facilities. 3 Baystate Medical Center Amendment to DoN Project #1-3B36 Attachment 10.5.b Describe the associated cost implications to the Holder 4 Baystate Medical Center Amendment to DoN Project #1-3B36 10.5.b Describe the associated cost implications to the Holder. Due to the changes in the scope of the Project, the Holder is seeking approval for an increase to the currently approved MCE. The previous amendment approval authorized an additional $7,254,000 (October 2016 Dollars) to be spent on the Project, which resulted in the current approved MCE of $373,520,390 (October 2016 dollars). The Holder now requests approval for an additional $56,032,439 (July 2018 dollars) to be added in order to implement the Project described in this Amendment. The total requested MCE is composed of $49,234,439 for build out of shell space and $6,798,000 for the related renovation. The cost of construction on a per-GSF basis is $1,024, which is higher than the typical cost per GSF for general hospital construction due to the fact that all of the construction is related to complex infrastructure or procedure rooms. All of these areas are highly technical in nature and have additional costs associated with such things as electrical, plumbing and HVAC that increase the cost per GSF for construction as compared to patient rooms or other areas that are not as complex. The requested $56,032,439 addition to the DoN's approved MCE is relatively modest when the scope and nature of the entire Project is considered. It is well within the Holder's financial capability. Moreover, it is consistent with the underlying premise of this DoN approval, which provided for shell space for future expansion and replacement of current hospital facilities when demand is sufficient and as the Holder can reasonably accommodate the capital expenditure. The chart below details the requested additional capital expenditures compared to the last approved amendment by DoN capital cost categories. Requested New Requested Total Category of Expenditure Const Renovation Additional (7/18 $) (7/18 $) MCE Land Costs Land Acquisition 0 0 0 Non-Dep. Land Dev. 0 0 0 Site Survey and Soil 0 0 0 Total Land Costs 0 0 0 Construction Costs Deprec. Land Development Costs 0 0 0 Construction Contract 23,119,589 5,100,000 28,219,589 Fixed Equip Not in Contract 0 0 0 Architectural & Engineer Costs 1,884,000 400,000 2,284,000 Pre-filing Plan & Development 37,000 8,000 45,000 Post-filing Plan & Development 37,000 8,000 45,000 Other: Information Services 5,270,000 1,155,000 6,425,000 Other: Furniture and Fit-out481 481,850 105,000 586,850 Net Interest Expense During Cons 0 0 0 Major Movable Equip 18,405,000 22,000 18,427,000 Total Construction Costs $49,234,439 $6,798,000 $56,032,439 Financing Costs Costs of Securing Fin 0 0 0 Total Financing Costs 0 0 0 Total $49,234,439 $6,798,000 $56,032,439 5 Baystate Medical Center Amendment to DoN Project #1-3B36 As the above chart illustrates, the majority of capital costs are associated with the construction costs for the build-out of shell space and the acquisition of equipment.
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